Crisis meeting sparks fear of Hong Kong clampdown

THE HONG Kong Monetary Authority has called in local banks to a crisis meeting in Hong Kong today in a move which has sparked fears of a Malaysia-style clampdown on financial market dealings.

Dealers said the meeting could signal that new steps to control the stock market were on the way.

Hong Kong government sources insisted last night that there was no question of introducing exchange controls since these were explicitly banned by Hong Kong's constitution. The meeting would centre on the discussion of measures to strengthen the existing currency board system which for the last 15 years has pegged the HK currency to the US dollar.

"It is not for me at this point in time to come to the specifics because that would need to be discussed with the banks," said HKMA's chief representative in New York. "I just want to put the message acrosss that the issues to be discussed will be centred around measures to further strengthen and purify the currency board system."

Hong Kong Financial Secretary Donald Tsang pledged earlier this week to introduce new measures to "improve transparency of the stock market". The package could be unveiled as early as Monday.

But the government is under pressure to find a way of convincing the markets that the dollar peg which has been the linchpin on the region's economic policy since 1983 can hold, in the face of an almost universal belief that devaluation is now an inevitability.

Rachel Chan who heads the Hong Kong Government's Economic and Trade Office in London insisted that the Hong Kong Government was committed to the free market and was not trying to introduce the kind of exchange and capital controls that Malaysia has brought in.

"A lot of governments in the region are trying to control the market. We are not going to be one of them," she said.

But such statements have failed to reassure foreign investors. "Hong Kong shorts are very nervous," said one dealer last night. He was referring to the international investors who have been selling or "shorting" the currency in anticipation of an imminent devaluation. The Hong Kong Monetary Authority is believed to have spent HK$120bn over recent weeks to support the Hong Kong dollar by buying shares in the market.

The HKMA has ended up with sizeable stakes in as many as 30 companies. But apart from the 8.9 per cent stake in Hong Kong & Shanghai Bank which it was obliged to disclose because of London stock exchange rules, it is refusing to release further details. The authority is also exerting pressure on brokers who have drawn up their own lists of HKMA holdings not to release those to the public.

It is nevertheless believed that the authority has large stakes in such well-known companies as Huchison Whampoa, the largest shareholder in Orange the UK mobile phone operator; Swire, which owns Cathay Pacific the airline, and Cheung Kong, the property company controlled by pro-China entrepreneur Li Ka Shing.

The intervention appears to have stabilised the stock market for the time being. The Hang Seng index closed up more than 2 per cent at 7488.47 yesterday, before news of the crisis meeting had come out.

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Analyst - ALM Data - Banking - Halifax

£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

Java developer - Banking - London - Up to £600/day

£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

Liquidity Reporting-Basel III-LCR-Bank-£400/day

£400 per day + competitive: Orgtel: Liquidity Reporting - Basel III - LCR - Ba...

Investment Manager – Media and Entertainment

Up to £50,000 per annum + Bonus + Benefits : Sauce Recruitment: We are repre...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz